Rivkin Rips Into Agents
Sun Herald
Saturday October 12, 1996
MILLIONAIRE stockbroker and businessman Rene Rivkin has slashed insurance policy premiums by up to 30 per cent and attacked agents' hidden commissions.
The heavy discounts amount to savings of at least $5,000 over 20 years on a typical life insurance policy, and will almost certainly lead to an outcry from insurance agents and a shake-out of the industry.
It is likely to hasten the demise of agents and insurance brokers and will make mergers between banks and insurance companies even more attractive after the Wallis inquiry into banking brings down its report next year.
Pressure from agents and brokers is believed to have forced his original insurers, Tyndall and Mercantile Mutual, to pull out a day after The Sun-Herald revealed his no-frills discount insurance plans four months ago.
Mr Rivkin attacked commissionearning agents yesterday, claiming: "The insurance industry has been foisting high pressure sales people on unsuspecting consumers for too long."
He warned: "The public hasn't fully understood the magnitude of commissions on insurance policies which under the present law don't have to be disclosed."
He said these could add up to 150pc of the premium.
Mr Rivkin, former stockbroker to corporate high fliers such as Kerry Packer, operates a discount stockbroking operation, Rivkin Croll Smith.
In a breakthrough which amounts to a full-bodied assault on the insurance industry, Citibank will underwrite the new policies.
The discount or gap between other insurers widens the longer the policy is held. The policies will be sold as Rivkin Direct based on a free-call number, 1800 816 227.
Life insurance, income protection and trauma policies will be offered. The firm is non advisory, with no commission, although a flat, fixed annual fee of $99 will apply for administration. This rises to $149 for premiums over $600.
"On 90pc of policies the fee will be $99 flat," Mr Rivkin said.
But, he added, across most categories Rivkin Direct easily under-cut other insurers, including the NRMA and giants such as AMP and National Mutual. The savings depended on many factors, including age, risk and benefits offered.
For a 40-year-old non-smoking man with a $500,000 life policy, Rivkin is $140 per year cheaper than NRMA, the margin gradually increasing over time.
For a $400,000 trauma policy for a 50-year-old man, Rivkin Direct is $935 a year cheaper than the next closest insurer, Prudential.
Although insurance policies vary between insurers, Mr Rivkin said, "we are 30 to 40pc under with our wholesale price from Citibank, then we add a flat service fee. There are no commissions, so our discounts are effectively 25pc each year."
Rivkin Direct's price advantage begins where the annual premium exceeds $300 and increases with the cover required and age of the insured.
Policies offered by insurance companies have initial commissions of more than 100pc of the first year's premium. Unlike investment products, these commissions do not have to be disclosed.
In his initial plans, Mr Rivkin rebated the first-year commission.
But the Rivkin Direct launch extends the discount right through the policy.
"Our customers will be better off anyway, but compared with the initial product, they will be better off within 18 months, and far better off after that," Mr Rivkin said. "These are annual savings which get bigger, not one-off like before."
Mr Rivkin's commission rebates caused a furore among insurance agents, but the re-launch is even more aggressive.
"We underestimated the control agents and brokers had over the insurance companies and the pressure they were able to exert to protect their archaic and expensive distribution system, which imposes greater costs and few benefits to the consumer," Mr Rivkin said.
"Our Rivkin Direct service, which will be convenient, service orientated and price driven, will quickly gain a strong market share in the insurance market in the same way as mortgage managers like Aussie Home Loans have revolutionised home lending."
© 1996 Sun Herald
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